The London Underground and the public-private partnership agreements : second report of session 2007-08, report, together with formal minutes, oral and written evidence

This report from the Transport Committee examines London Underground and the Public-Private Partnership Agreements.

The Government originally announced proposals for modernising the London Underground network system via Public-Private Partnership (PPP) agreements in 1998.Three contracts were drawn up with: Tube Lines - for the maintenance and renewal of the Jubilee, Piccadilly and Northern Lines; Metronet Rail BVC - for the maintenance and renewal of the Bakerloo, Central, Victoria, and Waterloo and City Lines; and, Metronet Rail SSL - responsible for the maintenance and renewal of the 'sub-surface lines' (the Circle, District, Hammersmith and City, Metropolitan, and East London Lines).These PPP Agreements, 30 years in duration, were arrangements to maintain, renew, and upgrade parts of London Underground by private sector infrast ructure companies (Infracos), whilst London Underground is responsible for services to customers.

The PPP Agreements also set out a performance-related incentive and penalty scheme to remunerate the Infracos for the improvements they make to the network.In May 2007 Metronet admitted to an overspend of GBP 1 billion and was refused access to loan facilities by the banks. It then made a reference to the PPP Arbiter which in turn triggered an Extraordinary Review (occurs when extra costs are incurred above the level allowed for the bid).

Metronet put in a bid for GBP 551m but the PPP Arbiter provisionally concluded that a sum of GBP 121m was appropriate.

Metronet subsequently went into administration on 18 July 2007.Conclusions and recommendations include: contracts that were supposed to deliver 35 station upgrades in fact delivered only 14 - 40 per cent of the requirement; stations that were supposed to cost Metronet SSL GBP 2m cost GBP 7.5m, with only 65 per cent of scheduled track renewal accomplished; the consequences of the imposition of PPP on Transport for London is a 'lamentable state of affairs', with the future of most of London Underground's upgrade and maintenance work in doubt; the Government should remember the failure of Metronet before it considers entering similar arrangements; the Government should publish a candid analysis of the events preceding Metronet's collapse and its consequences; the PPP model was flawed and probably inferior to traditional public-sector management; and, the Government needs to prioritise transparency and clarity to tax payers and ensure that any future contracts result in clear accountability.